Introduction
Welcome to the Prop 19 webinar brought to you by the Alameda County Assessor’s Office. In this webinar, we will be discussing the details of Proposition 19 and its implications for property owners in Alameda County. Please note that the information provided in this webinar is for general informational purposes only, and it is important to consult with a CPA or attorney for specific legal and tax advice. We would also like to thank everyone who submitted questions in advance, as we have incorporated them into the presentation to address your concerns. Let’s get started!
Background
Proposition 19 is a recent law that was passed in November 2020 by California voters. It consists of two main components: the base value transfer and the parent-child transfer exclusions. To fully grasp the implications of Prop 19, we must first understand Proposition 13, which was passed in 1978. Proposition 13 limited property tax increases and provided benefits for long-term property ownership.
Proposition 13 and Current Property Tax Law
Under Proposition 13, property taxes are assessed based on the property’s value at the time of acquisition. For example, if a property was purchased for $100,000 in 1980, it would be assessed at that value, regardless of its current market value. Property taxes increase by a maximum of 2% each year, resulting in significant savings for long-term property owners. However, if the property is sold, the new owner will be assessed at the current market value, potentially leading to higher property taxes.
Parent-Child Transfer Exclusion
Proposition 19 introduces changes to the parent-child transfer exclusions for primary homes and investment properties. Under the previous law, parents could transfer their primary residence or up to a million dollars of assessed value of rental property to their children without triggering a reassessment. This allowed the children to keep the low property tax basis. However, Prop 19 alters these exclusions, and it is essential to understand the new rules.
Base Value Transfer for Individuals 55 and Older
Proposition 19 also introduces the base value transfer for individuals aged 55 and older, which replaces Proposition 60 and Proposition 90. These base value transfers allow eligible individuals to transfer their low property tax basis when buying a new home in the same county or select neighboring counties. To qualify, the market value of the new home must be equal to or less than the market value of the home being sold.
Key Considerations and Deadlines
It is crucial to note that Prop 19 has specific criteria and deadlines that must be met for eligibility. For parent-child transfers, the child must file a claim for exclusion with the Assessor’s Office within a specified timeframe. Failure to file this form will result in reassessment at market value. Additionally, it is advisable to seek professional advice from a CPA or tax attorney regarding potential capital gains issues and other complexities related to trusts, wills, and LLCs.
Understanding the Impact of Prop 19
To illustrate the impact of Prop 19, let’s consider an example. Suppose a property was purchased in 1980 for $100,000 and is currently assessed at $200,000 due to the 2% annual increase. Under the previous law, if the property were transferred to a child, the low property tax basis of $200,000 would be retained. However, if the transfer is not completed before the specified deadline, the property will be reassessed to its current market value, resulting in significantly higher property taxes.
Conclusion
Proposition 19 has brought about significant changes to property tax laws in Alameda County. It is crucial for property owners to understand the implications of this law, particularly in terms of base value transfers and parent-child exclusions. Consultation with a CPA or attorney is highly recommended to ensure compliance with the new regulations and to address individual tax and legal needs. For more information and to access the slides from this webinar, visit the Alameda County Assessor’s Office website.